The Walt Disney Company
) delivered robust second-quarter results, driven by solid
performance of Parks and Resorts and the Media Networks segments.
The quarterly earnings of 58 cents a share exceeded the Zacks
Consensus Estimate of 56 cents and increased 18% from 49 cents
earned in the prior-year quarter. However, including one-time
items, earnings jumped 29% to 63 cents.
Total revenue for the quarter increased 6% year over year to
$9.63 billion, beating the Zacks Consensus Estimate of $9.60
million. Total segment operating income increased 10% year over
year to $1.9 billion.
Through its strong operating results, Disney continued to invest
in its core businesses while expanding its operating margins.
Moreover, the company remains well positioned to drive revenue in
the coming years through its strategic initiatives.
Despite difficult operating environment, the company did not
change its strategies, but remained focused on deploying its
capital toward expanding its Parks and resorts business, and in
turn, enhancing its markets and creating long-term growth
opportunities. In China, the company remains on course to build its
Shanghai Disney Resort, including Shanghai Disneyland, two themed
hotels, and retail dining and entertainment venue.
As per the company, the success of ESPN continued as the channel
had a record number of viewers in the quarter, and remained the
favorite destination for sports lovers. In the last few years,
ESPN, with its right mix of exclusive sporting licenses and top
sporting leagues emerged as an industry leader in the pay-TV
industry. This success has made ESPN the key driver of revenues at
the Media Networks division in recent times.
Moreover, in a strategic move, Disney entered into a 10-year
long-term comprehensive programming distribution deal with
), thus enabling an authenticated pay-TV subscriber of Comcast to
watch a vast library of Disney content any where, any time, and on
any device. Comcast has a huge video and high-speed broadband
subscriber base, which will be highly beneficial for Disney in
raising its viewership ratings.
revenue climbed 9% year over year to $4.7 billion, reflecting a 12%
increase in Cable Networks revenue coupled with a 2% rise in
Broadcasting revenue. The segment's operating income rose 13% to
$1.7 billion compared with $1.5 billion in the prior-year period.
Cable Networks' operating income increased 11% to $1.5 billion
driven by growth across ESPN and domestic Disney Channels.
Moreover, operating income at the Broadcasting division spiked 37%
to $229 million, reflecting increased advertising revenues and
lower programming and production costs.
Parks and Resorts
revenue rose 10% to $2.9 billion, reflecting higher revenues from
domestic parks and resorts, Hong Kong Disneyland Resort and Tokyo
Disney Resort. The segment's operating income increased 53% to $222
million, reflecting higher guest spending at domestic parks, partly
offset by increased costs.
revenue saw a decline of 12% year over year to $1.2 billion, while
operating loss was 84 million during the quarter, as the company's
science-fiction 'John Carter' proved to be a disaster, resulting in
lower theatrical revenues and film cost write-downs.
revenue increased 8% to $679 million, while segment operating
income increased 4% to $148 million. Disney stated that the
increased revenues from Merchandise Licensing were offset in part
by lower revenues from the retail business.
revenue for the quarter increased 13% to $179 million, while
operating loss improved as the segment reported an operating loss
of $70 million compared with $115 million in the prior-year
quarter, due to a stronger gaming business.
Other Financial Details
During the quarter, Disney generated free cash flow of $335
million. The company ended the quarter with cash and cash
equivalents of $3.7 billion, net borrowings of $12.3 billion and
shareholders' equity of $38 billion, excluding non-controlling
interest of $1.9 billion.
Strong results enable the company to enhance shareholders value
through share repurchases. The company bought back 21.4 million
shares for approximately $870 million. Fiscal year-to-date, Disney
repurchased 51 million shares for approximately $1.9 billion.
Walt Disney is one of the world's leading diversified
entertainment companies. Moreover, the company commands a
formidable portfolio of globally recognized brands, primarily its
namesake brand Walt Disney, followed by ABC, ESPN and Marvel
Entertainment. These renowned brands offer a strong competitive
edge to the company and bolster its well-established position in
the market against major players like
Time Warner Inc
We maintain a long-term 'Neutral' recommendation on the stock.
The shares of Disney currently retain a Zacks #3 Rank, which
translates into a short-term 'Hold' rating.
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